Freeland not clear whether US steel tariffs will kill USMCA ratification

Foreign Affairs minister Chrystia Freeland still calls U.S. tariffs on Canadian steel “illegal and unjust;” “frankly absurd”, but won’t say definitively if they would prevent her government from ratifying the new NAFTA agreement, or what the U.S. calls United States-Mexico-Canada Agreement.

Following Tuesday’s cabinet meeting, Freeland told reporters that concern stateside about the tariffs bodes well for Canada, whose steel manufacturers exporting to the U.S. have been suffering their effects for more than 10 months.

“We are hearing from American leaders in the Senate, from American leaders in Congress, from American trade unions that they agree with us that the 232 tariffs should be lifted,” she said. “That they believe they cannot support the ratification of the new NAFTA without those tariffs being lifted.  That is positive news when it comes to Canada.”

While Canada retaliated with similar tariffs on U.S. steel entering Canada, it has also provided $140 million in compensation to affected domestic players.

The North American Free Trade Agreement came into effect on January 1, 1994, expanding the Canada-U.S. free-trade deal of 1988 to include Mexico and in the process created the largest ‘free trade’ zone in the world.

After 14 months of tumultuous re-negotiations of that deal between the Trudeau government and the U.S. administration of President Donald Trump, Canada emerged slightly battered but claiming victory having fought to keep NAFTA chapters 19 and 20 – the former to resolve trade disputes between companies and governments; the latter a government-to-government dispute settlement mechanism.

To get this deal, Canada gave the U.S. access to 3.6 per cent of our supply management dairy sector previously off-limits to American producers. Other Canadian agriculture concessions in the USMCA included supply-managed poultry and egg production. 

Although dairy concessions were barely one-third of a percent more than similar access provided to Asian producers under the Trans-Pacific trade deal, domestic dairy farmers decried what they viewed as capitulation to Trump’s demands.

The new NAFTA, or USMCA, also extended biologic pharmaceutical patents to 10 years from eight, and allows Canadians to spend more online at U.S. retailers without paying duty.

But after the trio of leaders, including Mexico’s President Pena Nieto, inked the deal on November 30 of last year, Canadian steel producers were irked that the Trudeau government didn’t push harder to have U.S. tariffs lifted.   

On June 1, 2018, the U.S. slapped tariffs on Canadian steel and aluminum – citing national security concerns, while the countries were at loggerheads on other trade-related matters, including supply-management regulations that restricted U.S. dairy products from Canadian markets. As well, the U.S. had already placed tariffs on Canadian softwood lumber.

As tariffs took effect, the Canadian International Trade Tribunal was already in the throes of investigating multiple complaints of substandard and subsidized Asian steel and aluminum – Chinese, Korean and Vietnamese – allegedly dumped into Canada and leaking into the United States’ market. 

As far back as April 2018, United Steelworkers’ Canadian director Ken Neumann publicly urged the federal government “to prevent so-called ‘circumvention’ or ‘transshipment’ of foreign steel and aluminum that is first dumped into Canada and then diverted to the U.S. market.”

After Trudeau, Trump and Nieto signed on the dotted line last November, Neumann claimed domestic steelworkers were “being sacrificed” by the Liberal government to get the deal. 

But for the new USMCA to take effect, the deal needs to be ratified by all three countries; ratification that Freeland suggested may be a difficult pill swallow in light of steel tariffs.

“I will say to Canadians what I have been saying in the US both in public and private meetings which is that it is very hard for a lot of Canadians to understand how we could move ahead with the new NAFTA while these illegal, unfair and absurd tariffs are still in place,” said Freeland.

Her comments come the same day the World Trade Organization determined the U.S. violated international trade rules in calculating tariffs on Canadian imports of softwood lumber. But the decision was mixed, and offered some credence to the U.S.’s calculating methodology on anti-dumping duties for Canadian softwood.

Reporters hoping to hear more from Freeland on looming Canadian ratification of the USMCA in the context of “illegal” steel tariffs were disappointed with her afternoon appearance that the Senate’s foreign affairs committee. 

Originally scheduled as a two-hour session – a vote in the Senate truncated the affair – Freeland did not face any specific questions on the tariffs’ implications for ratifying the trade deal and offered similar comments she offered media earlier in the day.

Before the meeting adjourned, 45 minutes early, Freeland answered a variety of questions topics ranging from the Russian invasion of Crimea in Ukraine, Brexit, multilateral talks with France, Germany and Japan on maintaining “rules-based international order” and the rise of “white supremacy” as a national security concern.